Summary
Add the sreUSD-long LlamaLend market with vault address 0xC32B0Cf36e06c790A568667A17DE80cba95A5Aad, allowing users to mint reUSD and leverage supply to the market.
Set the market with a max 95% LTV, 5% liquidation fee, and 10m reUSD max borrow.
Abstract
The sreUSD-long market has been configured similar to previously deployed stablecoin markets, allowing for high leverage looping while accounting for direct redemption from the protocol for a redemption fee. The sreUSD-long market utilizes a custom oracle contract deployed by Resupply that prices reUSD/USD from the Curve reUSD/scrvUSD pool with the aggregated price of crvUSD and a minimum price bound at 0.99. It applies the sreUSD vault rate, a fork of sfrxUSD that has been deployed very recently.
LlamaLend Market Specification:
Market Parameters
| Parameter | Value |
|---|---|
| A | 200 |
| fee | 0.2% |
| liq_discount | 1.5% |
| loan_discount | 2.0% |
Parameter Optimization Methodology
We parameterized the sreUSD → crvUSD LLAMMA market before sreUSD launched. Given the absence of live sreUSD data, we constructed a synthetic price series that approximates the stability characteristics of the intended market.
Data Selection and Preparation
Base Dataset Selection: We use the REUSD/SCRVUSD (0xc522A6606BBA746d7960404F22a3DB936B6F4F50) Curve pool as the base series, as it mirroring the structure of the future sreUSD/crvUSD market by capturing:
- REUSD’s stability properties.
- SCRVUSD’s yield-bearing behaviour, while accounting for underlying crvUSD dynamics.
These properties make it a natural fit.
Proxy Pair Identification: To extend the dataset beyond reUSD’s launch in April, we identify a yield-bearing stable → non-yield bearing pool (ideally paired crvUSD/scrvUSD) with at least 12 months of price history to capture crvUSD price dynamics. Through the Curve UI we identified the following pools as possible candidates by scanning for pools with > 1m TVL:
| Pair | Pool Address | Deployment Date |
|---|---|---|
| sUSDe/crvUSD | 0x57064F49Ad7123C92560882a45518374ad982e85 |
Jun-01-2024 |
| FRAX/sDAI | 0xcE6431D21E3fb1036CE9973a3312368ED96F5CE7 |
Dec-16-2023 |
Candidate proxies of the underlying are ranked against REUSD/scrvUSD primarily based on volatility profile.
The closest statistical match was the crvUSD/sDAI pair constructed from the from following pairs CRVUSD_USDC * FRAX_SDAI / FRAX_USDC.
Synthetic History Construction: Extract returns from the selected proxy series and rescale to match the volatility profile of REUSD/SCRVUSD. Merge the scaled proxy history with the REUSD/SCRVUSD data to produce a continuous ≥ 12-month series.
Simulation Preparation: Ensure price direction is consistent with LLAMMA requirements (collateral per debt unit).Produce both:
- Raw short-history dataset (REUSD/SCRVUSD only).
- Extended merged dataset (proxy + REUSD/SCRVUSD).
These datasets will be run through the LLAMMA simulator, with parameter selection favouring configurations that perform safely on both.
The synthetic price path can be used for simulation can be observed below:
Note: The price path start at 0.92 due to scaling of the sDAI series. As we more interested in the volatility profile rather absolute price level it is acceptable for the purpose of the analysis.
Results
We inform the fee empirically by setting it on par with the competing pair, allowing the swapping of reUSD/crvUSD.
Fee
We see two candidates for the fee parameter, which minimize loss at a fee tier of 4bps and 20bps. Naturally, the higher fee tier is more favourable for the borrower. The borrower effectively acts as a liquidity provider in the LLAMMA. Consequently, a higher fee tier translates to more rebates to the borrower paid by arbitrageurs.
Amplification Factor
We select an A ≈ 200 (specifically A=206 from our grid). It sits on the Pareto frontier, delivering low tail loss (~1.08%) while keeping the liquidity discount (~2.04%) close to its practical minimum; higher A reduces haircut but raises the loss.
Liquidation Discount
Given that we estimate 95 ES and using a synthetic dataset, we very conservatively round up the liquidation discount from 1.08% to 1.5%.
Loan Discount
The purpose of the Loan discount is to avoid immediate liquidation when a loan is configured. Given that we are working with a stable asset, we add a 0.5% policy buffer as margin. This is in line with previous experiments conducted on sUSDe.
loan_discount = liquidation_discount + policy_buffer
The resulting loan discount is 2%, ~(1.5 + 0.5).
Monetary Policy
| Parameter | Value |
|---|---|
| Alpha (min multiplier) | .2x |
| Beta (max multiplier) | 7.2x |
| Target Utilization | 85% |
| Rate shift | 0 |
The market uses the EMAMonetaryPolicy contract for use with sreUSD. This contract calculates the sreUSD APR and uses this value to calculate the rate at a target utilization (85%). It applies a hyperbolic curve with multipliers on the max and min rates, striving for a relatively stable rate below target utilization and aggressive rate increase above the target. This contract is deployed with the same configuration as the sfrxUSD market monpol, including the calculator (this is possible since sreUSD is a fork of sfrxUSD).
Oracle
Proxy: Address: 0x8535a120...f41ca2887 | Etherscan
Implementation: Address: 0xc5BA754C...16e52C954 | Etherscan
In line with the deployment of recent LlamaLend markets, the implementation of an oracle proxy allows the Curve DAO to set a new oracle implementation without requiring a market migration. The implementation SreusdFromOracleVault is a custom implementation that uses Resupply’s own oracle contract to price reUSD in USD using the Curve reUSD/scrvUSD liquidity hub, the aggregated price of crvUSD, and imposes a 0.99 minimum bound on the returned price.
The underlying pools and contracts used in the oracle include:
- reUSD/scrvUSD: $54.1M TVL
- sreUSD Vault
- Resupply Oracle Contract
The TVL history for each of the pools used in the oracle implementation are shown:
reUSD/scrvUSD
Source: CurveMon
Risk Considerations
Reflexivity Risk: Borrowers minting reUSD on Resupply sell it into crvUSD, and then loop into the sreUSD LlamaLend market, whose underlying is also reUSD. This creates a feedback loop where borrowing increases sell pressure on reUSD while sreUSD simultaneously depends on reUSD’s stability. In a peg stress or liquidity shock, that circular dependence can amplify volatility, unwind pressures, and liquidation cascades more severely than in non-endogenous markets.
Stacked dependencies: reUSD solvency depends on the health of external lending venues and the constituent markets (LlamaLend, Fraxlend), the collateral stables (crvUSD, frxUSD), and the yield-boosting platform (Convex). A venue-side shortfall or depeg propagates into reUSD and therefore into sreUSD.
Insurance capacity: Liquidations are intended to be a rare circumstance, and are funded by the Insurance Pool. If losses exceed the reserve capacity, the protocol assumes the extra bad debt (effectively socializing losses). Note that liquidations are most likely to be necessary due to contagion from a failed lend market, but may also be necessary if a position’s borrow cost puts it at risk of undercollateralization.
Soft Peg: The redemption mechanism enforces a price floor near $1 minus the redemption fee; it doesn’t prevent upward depegs (which is considered acceptable). The redemption mechanism is dynamic and involves several factors such as a base fee, pair usage weight, and reUSD price premium. These factors adjust the cost to redeem depending on how frequently redemption is done through a specific market and based on the price of reUSD. These parameters and dependencies are settable by the contract owner and can change assumptions about the strength of the soft peg.
Governance: The Core contract authorizes privileged roles and can execute on protocol and non-protocol assets. The Voter is assigned to the smart contract described above. Although an onchain DAO, governance risk may arise from stakeholder concentration, especially given the relatively low staking period required to participate in governance (14 days).
Privileged Roles: There’s also a Guardian multisig managed by the Resupply team that can pause/cancel onchain proposals. Signers consist of reputable Convex and Yearn devs. This mitigates the governance attack vector described above but also represents a multisig trust assumption over DAO operations.
Bridging / OFT (LayerZero): sreUSD has native support for LayerZero’s OFT standard. OFT relies on LayerZero for message delivery and verification. Mis-config (e.g., DVN settings) or endpoint issues can stall or misroute transfers.